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Gas-rich Ohio is in the running for a $2 billion chemical plant 
January  7, 2012 

CLEVELAND, Ohio -- A giant chemical plant that processes natural gas is coming to the Midwest and Ohio leaders hope the state’s newly tapped gas deposits, coupled with growing industries that use gas products, make Ohio the favored location. 

Shell Chemical is finalizing plans for a $2 billion complex that is expected to create hundreds of jobs and pull other industries and manufacturers into its orbit. Shell has said only that it plans to build in either West Virginia, Pennsylvania or Ohio, three states that overlay ancient shale beds rich in natural gas. 

With a site announcement imminent, interest in Shell’s decision grows keener by the day. The placement of the mega-refinery, called a cracker, could define where other major oil companies establish operations in the nation’s newest energy field. 

“Shell is the first of the major oil companies to make a big investment,” said Edward “Ned” Hill, a professor of economic development at Cleveland State University. “Where that cracker ends up could end up influencing the regional headquarters of Big Oil.” 

All three states are reported to be offering tax breaks and other incentives to try and lure Shell, which has given no hint of its affections. 

“When we select our preferred site we will announce it,” Shell spokeswoman Alexandria Smith said Wednesday. “That will probably be February.” 

Major cities like Cleveland are not considered contenders but they could certainly be affected. Any location will likely be rural, but not remote. 

The plant needs hundreds of acres of land, according to Dan Carlson, Shell Chemical’s general manager of new business development in the Americas. Shell would also like access to railroads, river barges, a skilled workforce and university researchers, Carlson said via email. 

“What we’re looking for is cost-effectiveness and ease in moving this project forward quickly,” he added. 

Ohio Gov. John Kasich flew to Houston in late November to make a personal pitch to Shell executives and the state has provided written appeals from the governor’s Republican allies and Democratic rivals alike, including Democratic House Minority Leader Armond Budish of Beachwood and U.S. Sen. Sherrod Brown. 

Development officials will not divulge details of Ohio’s incentive package, citing state policy as well as a confidentiality agreement with Shell. 

“I expect they (Shell) are doing their homework, as any large company would,” said David Mustine, the general manager for energy at JobsOhio and a former energy industry executive. “We’re just focused on providing the best information possible.” 

While Ohio is a relative newcomer to the shale gas industry, with production levels well below those established in Pennsylvania and West Virginia, Mustine believes the state offers advantages that could lend Ohio an edge. 

Natural gas is one of the most wanted feedstocks for petrochemical production. A cracker is so-named because it “cracks” ethane molecules to produce ethylene, the basis of plastic. So far, Ohio’s natural gas deposits have proven rich in so-called “wet gases” like ethane. 

More important to a refiner like Shell, Mustine said, might be proximity to manufacturers that use ethylene and its derivatives, like polyethylene, a basic ingredient in auto parts and many consumer products. 

Ohio’s re-emerging auto industry and its well-established polymer and chemical industries pose ready markets for the new petrochemical plant, he said. 

Whoever wins the cracker lands an historic infusion of jobs. 

Shell’s Carlson said the construction project would span four to five years and employ about 10,000 workers. The finished plant would need “several hundred” permanent workers. 

Meanwhile, the world-scale petrochemical plant is expected to draw related industries that would invest billions more. A March study by the American Chemistry Council concluded that a Midwest cracker would spark another $1 billion to $1.5 billion in private investments by manufactures who want to be nearby. 

It would also herald a huge step for the region’s nascent shale gas industry. Most of the nation’s ethane crackers operate near the Gulf Coast, the current hub of the U.S. petrochemical industry. There has not been a cracker built in the Midwest in a generation, according to the chemistry council. 

Some skeptics have questioned Shell’s commitment to build from scratch in the Midwest, noting the Gulf Coast offers a working network of pipelines, seaports and storage facilities. Oklahoma-based Chesapeake Energy, the dominant player in Ohio’s Utica shale play, recently committed to shipping ethane south by pipeline, rather than processing it here. 

But Shell has made a strategic decision to re-introduce gas refining to the Midwest, Carlson said via email. His company would like to crack ethane closer to Northeastern manufacturers, he wrote. What’s more, Shell believes enough natural gas lies buried in the Appalachian rock to feed a number of processing facilities. 

By investing billions in Midwest shale gas, experts say, Royal Dutch Shell is making a statement others will heed. 

“Companies don’t spend that kind of money if they’re not certain there’s a profit in it,” said Terry Fleming, executive director of the Ohio Petroleum Council, an industry trade group. 

When Shell first announced its plans for a Midwest cracker in June, Fleming thought the Pittsburgh area held the advantage, due to its proximity to Ohio River barges and Pennsylvania’s head start in shale gas production. 

But after talking with Shell executives three weeks ago, Fleming said he’s not so sure. 

“They said Ohio’s making it a very difficult decision,” he said. 

Read this and other articles at the Cleveland Plain Dealer




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